Mobile handsets fell 75 per cent in Maharashtra for the first ten days of July over the corrosponding period in June, following 200 per cent increase in value-added tax (VAT). Handset makers feel the state’s rural telecom plans would also take a hit.
The fall is in comparison with the 10 days of last month. “Grey markets have supply from zero-duty places, like Dubai,” said the president of the Indian Cellular Association (ICA), Pankaj Mohindroo.
VAT collections in the state fell 25 per cent, while octroi collections fell 75 per cent during the first 10 days, Mohindroo said, quoting an ICA study.
Apart from the 12 per cent VAT, the state also levies a 5.5 per cent octroi and Customs duties of 5 per cent on imported handsets. A tenth of mobile handsets sold in the country are in Maharashtra.
The Maharashtra state government had hiked VAT from the earlier 4 per cent to 12.5 per cent, effective July 1. Maharashtra is the only state to levy a 12.5 per cent VAT, while Madhya Pradesh has proposed a similar hike.
ICA estimates the total VAT collection would be around Rs 33.5 crore, as against an expected Rs 168 crore earlier for the year. The gap is, it says, will be due to smuggling and other grey market activities.
“This would also impact the rural penetration, as the price hike will be the biggest dampener,” said Mohindroo.